Cross-Disciplinary Thoughts

(Formerly Ecologicial Economics)

February 16, 2007

The World Resources Institute’s EarthTrends weblog points to some data on trends in natural and manmade disasters.

Although natural and manmade disasters occur in all countries regardless of income or size, not all governments have the resources necessary for prevention and emergency response. For those regions already battling widespread poverty, disease, and malnutrition, disasters are a significant constraint on social and economic development. Understanding the trends that describe disasters through time and space is very important, particularly in light of climate change, which threatens to alter both the distribution and severity of disasters worldwide.

EarthTrends links to an interesting/scary figure on Trends in disaters below from UNEP.

With growing population and infrastructures the world’s exposure to natural hazards is inevitably increasing. This is particularly true as the strongest population growth is located in coastal areas (with greater exposure to floods, cyclones and tidal waves). To make matters worse any land remaining available for urban growth is generally risk-prone, for instance flood plains or steep slopes subject to landslides. The statistics in the graph opposite reveal an exponential increase in disasters. This raises several questions. Is the increase due to a significant improvement in access to information? What part does population growth and infrastructure development play? Finally, is climate change behind the increasing frequency of natural hazards?

March 14, 2006

Last fall I got Caroline Baum’s new book Just What I Said. Not since Paul Krugman’s The Great Unraveling have I found a bus-book so enticing. Like Krugman’s book, Baum packages together some of her best Bloomberg Columns as subchapters in a book on "bonds, banks, budgets, and bubbles." Often I agree with Baum's reasoning. Sometimes I disagree. But always I’m challenged to think.

One article was built from a base of Malthusian theory, casting economists as chronic worriers, "worrying about man’s ability to provide food and other necessities for a growing population." The theme of the essay, titled, "Field of Gloom is Never Too Crowded for New Blood," May 13, 2004, is focused not so much on Thomas Malthus' fear of catastrophic supply shortage, but rather on demand shortage due to productivity gains and excess capacity.

Baum concludes:

Any discussion about the death of demand without reference to price is essentially meaningless. The demand curve … is downward sloping. For most items, lowering the price increases the quantity demanded. It’s always worked that way. I suspect it always will. Both consumers and producers understand it. I've never worried about a lack of human ingenuity. If I'm going to spend time worrying, it’ll be about the sun doing dark in 5 billion years, not the death of demand.

I can’t argue with the Baum’s conclusions as far as they go. But what is left out tells an entirely different story. This is one of those disagreement moments. My disagreement is not on the surface, but in looking deeper. Martin Zweig, for example, in his Winning on Wall Street tells us that there are times when we need to be wary of conventional wisdom. Zweig says,

As the bull market continues to move higher, more and more people turn bullish. The flash point is really hit when the crowd has gotten so optimistic that it has used up the bulk of its cash. Cash represents firepower in the stock market. When it’s depleted, the ammunition to blast stocks higher is gone.

Zweig is talking about budget constraints that play into demand as much as prices do. If people run out of cash faster than prices adjust downward there are demand-side problems to accompany attendant supply-side problems of industries running out of cash. When Zweig worries about impending bear markets, he worries about three things, mainly: extreme deflation, too high price/earnings ratios, and inverted yield curves. In the first, "extreme deflation" we see the shadow-side of the "lowering the price" argument.

My disagreement also goes for the supply-side. Baum quotes Greg Mankiw's Principles of Economics. saying that "Growth in mankind’s ingenuity has offset the effects of a larger population." Then Baum dredges up the well-known Julian Simon v. Paul Ehrlich bet, letting us all see the folly of Ehrlich's relatively near-term prediction of massive shortages of natural resource, famine and death on an unprecedented scale.

Baum too recognizes that there are many perspectives on matters economic, and concludes a different chapter with,

…. Economists continue to debate [the viability of arguments for and against cost-push inflation and] the causality between wages and prices. Neither side will convince the other of the superiority of the argument. It's merely a question of preaching to the converted or being ignored by the faithful.

I'll expand that reasoning to say that no ideological camp will convince others of the superiority of any economic argument. Mostly no one from any camp will even listen to arguments from other camps. To get a better feel for this, surf over to The History of Economic Thought’s Schools of Thought (60 or so, lumped into four main blocks). And for historically inclined, adventurous types, read through The Walrasaid to get a glimpse as to the confusion, consternation among economic ideological camps today and how it came to be.

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PURPOSE

Our Ecological Economics web-log is designed to daylight and refine economists’ and ecologists' views, agreements, and disagreements on current environmental and natural resource issues. We also hope this blog will help ecological economics ideas gain traction in social and political discussion and policy making.